Senior Microsoft executives are warning that PC sales in the last quarter will be lower than expected, saying the effects of the floods in Thailand are having a lingering impact.

CFO Tami Reller told a JPMorgan Chase & Co. conference that the flooding was causing the PC industry more serious problems than had been expected. Analysts are predicting flat sales or a slight decline Reller said, but she warned that the figures could be significantly lower for some time to come, which will mean reduced Windows licensing and application revenues.

“It tends to take a few quarters to work its way through the system,” she said, Bloomberg reports. “It would be naive to believe otherwise.”

Reller's comments were backed up by Bill Koefoed, Redmond's general manager of investor relations. “As the numbers come out, you'll likely see that number decline further as the impact has been felt faster than people had anticipated,” he said at a separate event.

The shortage of HDD capacity after the Thai flooding, and its still-lingering aftereffects, has been a significant problem for the PC industry, limiting its ability to discount prices for the all-important holiday season. Manufacturers have already seen sales flatline, and the shortages have been particularly hard in the high-margin laptop HDD market.

Analysts are warning that manufacturers will run out of inventory by spring and will have to raise prices or restrict supply by other means. Despite some factories coming back online, and indeed new ones opening, HDD manufacturers are warning the effects could last for a year – and that's supposing that the flooding isn't repeated for a third time this year.

While the "Thai factor" is having an undeniable effect, it's not the only reason for the decline in sales in the sector. Beige box sales are dying in mature markets, and increasingly local vendors in China and India and encroaching on customers who might have bought Dell and HP systems. The ever-increasing spread of open source and other alternatives also has to be factored in to the decline in Microsoft’s fortunes.

Microsoft has its latest earnings call scheduled for January 19, and it doesn't sound like it's going to be a pleasant presentation to make. Shareholders are getting increasinglyfractious, and the gist of the executives' remarks suggests that revenues are going to be down for the next few quarters.

Redmond's great hope is that Windows 8 will give it a major boost, giving it more enterprise and cloud appeal, as well as access to the tablet market at last. The beta is due in February, which should mean release to manufacturing (RTM) by October, so it's going to be at least a year before that helps Microsoft's revenue. Steve Ballmer looks to be facing a rough 2012. ®